* The dollar rose in NY trading Wednesday, supported by risk aversion following reports that China’s government may take steps to curb excess capacity and overinvestment in certain sectors. Since the beginning of the financial crisis, good news had pressured the dollar while bad news had supported it. However, today’s reports on gains in both durable goods orders and new-home sales did not seem to pressure the dollar. The dollar index was up 0.5%, again testing the resistance from the 6-month old downtrend. A penetration of this downtrend will change the dollar’s near-term outlook. US stocks were little changed; the S&P 500 was up 0.12 points to 1,028.12. The yen was little changed versus the greenback. The euro was unable to hold on to gains incurred after German business sentiment rose to the highest level since September 2008. Sterling fell for a sixth day. We took a nice profit on our long GBP/USD that we entered at 1.4845. The Canadian dollar fell on concerns over the commodity-market outlook.
* The AUD/USD fell for a second day after worries about the Chinese economic expansion. The pair is dependent on the Chinese economic outlook as China is a major export destination for Australian goods. The AUD/USD has traded sideway after failing to break the important 0.85 resistance. If the 0.82 support is broken, the pair will turn more bearish and may penetrate the 0.80 support.
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